Mansion House: Bank of England measures to maintain a fit for purpose resolution regime

The Bank of England (BoE) has published a suite of publications in its capacity as the UK′s resolution authority, covering significant updates in relation to its approach to setting the minimum requirement for own funds and eligible liabilities (MREL) and preferred resolution strategies, and its approach to assessing resolvability under the resolvability assessment framework (RAF).

On MREL and resolution strategies, the BoE has made a substantive update to the MREL framework, publishing a policy statement confirming the changes and an updated Statement of Policy which will be effective from 1 January 2026. As a high-level summary, key areas of change are set out below.

These include:

• Total loss-absorbing capacity (TLAC) provisions, where the framework will be simplified by the revocation of such provisions currently in the UK Capital Requirements Regulation and the consolidation of some provisions in the updated Statement of Policy.
• Contractual triggers in internal non-CET1 own funds instruments, which will only apply to newly issued instruments. The policy statement also confirms that, following industry feedback, the BoE has amended its original proposal so that firms would not be expected to include contractual triggers is non-CET1 own funds instruments or eligible liability instruments issued by non-UK entities except where the BoE stipulates otherwise in respect of non-UK material subsidiaries where the host authority has not published MREL-equivalent regulations or regulatory proposals.
• Increasing the indicative thresholds for setting resolution strategies to GBP25 billion (above which a firm would be considered too large to be put into modified insolvency and therefore would be expected to be set either a transfer or bail-in preferred strategy) and GBP40 billion (above which a firm would be expected to have a preferred bail-in strategy).
• MREL for transfer firms being set at minimum capital requirements (MREL). The BoE also confirms that it would not expect to set MREL for small domestic deposit takers (SDDTs) or SDDT consolidation entities.
• Clarifications on the appropriate basis for measuring MREL eligible liabilities.
• Introducing a carve-out to the requirement for independent legal advice on the eligibility for MREL in the case of a "repeat issuance", where the material issuance terms are substantially the same as a previous issuance in respect of which an external eligibility legal opinion was given.
• Removing the requirement for pre-approval of changes in the form of internal MREL, replacing it with a requirement to notify the BoE at least 15 days in advance.

The PRA simultaneously has published consultations on amendments to MREL reporting and amendments to MREL disclosure requirements, in conjunction with the BoE's updates to its policy. The deadline for comments is 31 October.

On the BoE's approach to assessing resolvability, the PRA has published a consultation paper with two key proposals. First, the PRA proposes to apply the Resolution Assessment Part of the PRA rulebook to firms with retail deposits of at least GBP100 billion, an increase from the current GBP50 billion threshold. The PRA states that its view would ensure that the rules apply to the appropriate firm population, with extensive reporting and disclosure requirements applying to firms with the potential to pose the greatest risk to UK financial stability. Secondly, the PRA proposes reducing the annual requirement for SDDTs to review recovery plans to at least every two years. The PRA considers this to be more proportionate and, in addition, is consistent with the PRA's prudential framework for ILAAP and ICAAP review requirements for SDDTs which are not new and growing banks.